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Ethane demand loss due to outages near 2014 levels; price impact mixed
HOUSTON, September 13, 2016 (PCW) -- In August, ethane demand loss due to ethylene plant outages came in at around 155,000 b/d (as per EnVantage estimates) – close to levels last seen in the summer of 2014, when as many as seven crackers went down for planned and unplanned outages, putting overall US Gulf Coast operating rates at around 88%, according to PetroChem Wire data.
At that time, with crude oil prices dipping on either side of the $100/bbl mark, spot ethylene expectedly saw a slight uptick, while ethane dipped (see graph below). Another rash of cracker outages in 4Q 2014, however, saw an initial spike in ethylene, which ultimately petered out as both ethane and ethylene were sunk by crude’s 41% crumble to below $60/bbl.
Both crude and natural gas’ continued decline to the $20/bbl and sub-$1/mmBtu levels, respectively, have continued to hold sway over both ethane and ethylene, more so than fundamentals, through the end of 2015. But with crude now effectively rangebound in the $40-$50/bbl band and natural gas similarly caught between $2.60-$2.90/mmBtu, fundamentals have begun to have a greater influence over prices.
In August, EnVantage estimates about 155,000 b/d of ethane demand loss thanks to about 11 plants having planned or unplanned outages during the month. This time, ethylene rose to its highest level since mid-2015, while ethane fell below 20 cpg, and has remained there ever since.
With more crackers coming online through the end of the decade, effectively upping ethylene production capacity by about 41% from current levels and ethane demand from these plants almost doubling as a result, it is foreseeable that price sensitivity for both ethane and ethylene over cracker operational issues could increase. -- Samantha Hartke
***Ethane demand estimates from EnVantage, PetroChem Wire prices